Why did the specter of collapse in far-away Hungary help sink the Dow by 323 points on Friday?
And why did similar scenarios in Greece, Spain, and Portugal trigger the Dow’s 1,000-point Flash Crash one month earlier?
Is it because those countries are so important to the future of America’s blue-chip corporations?
Not quite!
It’s because investors around the world are finally waking up to some shocking realities:
Shock #1 is that these countries are canaries in the coal mine — the first of many that could suffer the wrath of investors fed up with runaway deficits.
Shock #2 is that, in the UK and the US, federal deficits and total debts, as a percent of GDP, are similar to — or even larger than —those of Greece, Spain, Portugal, or Hungary.
Shock #3 is the recurring revelations of official deceptions. Investors suddenly discover that unemployed were counted as employed … that government debts were disguised as capital … that far bigger federal deficits were camouflaged. And it is these revelations that trigger the biggest selling panics, that are the final nail in the coffin for companies and entire countries.
But Shock #4 is the biggest and most dangerous of all — not just random deceptions by a few companies or a few countries, but a global deception in the credit ratings that investors rely on for nearly ALL companies and countries!
With gathering momentum right now, investors are beginning to realize they can’t trust the ratings issued by established agencies like Moody’s, Standard and Poor’s, and Fitch.
But this is not merely bad news for the agencies themselves. It’s also a powerful force that can drive global stock and bond markets into a nosedive.
When companies are downgraded, their share and bond prices automatically fall.So think about what it means when the grading system itself, encompassing thousands of ratings on trillions of dollars in securities, crumbles!It implies, in effect, a collective downgrade of nearly ALL the securities in the world — every rated corporate bond, municipal bond, and even government bond in existence!
Needless to say, this transformation is too massive to happen overnight; it will progress in three phases.
most amercans are to stupid to read the writing
ReplyDeleteon the wall.
so to us few us happy few
got gold?
i can see the writing on the wall i just don't understand what it says. what exactly am i or others suppost to be cautious about about this year and on?
ReplyDeleteGold is good, if you already have land. You can't eat gold.
ReplyDeleteea don't bow, you will be faced with much more then that and we know this is invalueable just as you know there are always critics even if they agree with you.on that note i am hungarian and our lives will not change much we live everyday closer to our roots and the crusades didn't get us, wwii didn't this won't but the real issue is the bankers are using states like ours to bring about their objective. oh and gold well it's good to have but lead is better!
ReplyDeleteLet the bodies hit the flo
ReplyDeleteAmerican media propaganda machine is putting investor fears about Europe so instead they buy our treasury debt. USA has to reissue a lot of debt and buy new debt so they want the market to go down and raise fear outside the USA so investors buy our debt. What a brilliant plan and it is working.
ReplyDelete99% of you are so gullible. Greece and Hungary total GDP is $500 billion, 3.5% of USA GDP and is less than Pennsylvania, and yet they get top news, thousands of articles, fear, worry, anxiety?!? Come on people, wake up!
Europe and Asia are both way worse than the USA. The thing is that in Europe what we're watching is the destruction of a system that has never worked, in America you're watching one of the only systems that has ever worked break down because it tried to become like those other systems. You should get over your self invested bigotry against your own country so you don't have to be so naive.
ReplyDelete